Seneca Hill Winery must decide on grape varieties to plant based on probability assessments of future demand. A decision tree and expected value calculations can aid in making a profit-maximizing decision. Changes in probabilities and profit projections affect the decision, as seen with adjustments to the likelihood of demand scenarios and revenue from Chardonnay.
Decision Making, Chance Events, and Consequences
The decision to be made by Seneca Hill Winery involves choosing which variety or combination of grape varieties to plant: Chardonnay only, Riesling only, or both. The chance event is the future market demand for each type of wine, which could be strong or weak. The consequences are the financial outcomes or annual profits that result from the combination of these decisions and chance events.
Decision Tree Development
A decision tree is a visual representation that starts with the decision node (the choice of grape variety), followed by chance nodes (representing the strong or weak demand for each wine), and the ends with terminal nodes indicating the profits.
Expected Value Analysis
To maximize expected annual profit, we calculate the expected value for each strategy:
Chardonnay only: 0.05*20,000 + 0.25*70,000 = 14,500Riesling only: 0.50*25,000 + 0.20*45,000 = 16,000Both: 0.05*22,000 + 0.50*40,000 + 0.25*26,000 + 0.20*60,000 = 33,500Both grapes offer the highest expected annual profit, so Seneca should plant both Chardonnay and Riesling grapes.
Revised Probabilities and Profit Projections
Changing the probability assessments affects the expected value calculations. With a higher likelihood of strong demand for both varieties when Chardonnay demand is strong, the expected profit changes, potentially altering the optimal decision. If Chardonnay profits decrease to $50,000 under strong demand, this also affects the expected values and might influence Seneca to reconsider the decision to plant Chardonnay only.
Briefly describe the conditions that should be met for market-based transfer pricing to lead to optimal decision making among subunits of a large organization. Notice that, when supply outstrips demand, market prices may drop well below their historical averages. What are distress prices and which transfer prices should be used for judging performance if distress prices prevail?
Answer:
Market based transfer pricing should be made only when it leads to the highest total profit for all sub units collated as a consolidated results of the entire organization.
Explanation:
Distress prices signal a markdown in the price of a good to sustain its production in the face of prevailing fall in prices.
When supply outstrips demand and sales slows down, continuing the production of the item is preferable as it covers some of the fixed costs of the product.
The distress price is the variable cost of the product plus a minimum mark-up.
The dual transfer prices should be used for judging performance if distress prices prevail
William Beville's computer training school, in Richmond, stocks workbooks with the following characteristics: Demand D 19 comma 900 units/year Ordering cost S $27/order Holding cost H $3/unit/year a) The EOQ for the workbooks is nothing (round your response to the nearest whole number). b) What are the annual holding costs for the workbooks? $ nothing (round your response to the nearest whole number). c) What are the annual ordering costs? $ nothing (round your response to the nearest whole number).
Answer:
a. 598 units
b. $897
c. $898
Explanation:
a. The computation of the economic order quantity is shown below:
[tex]= \sqrt{\frac{2\times \text{Annual demand}\times \text{Ordering cost}}{\text{Carrying cost}}}[/tex]
[tex]= \sqrt{\frac{2\times \text{19,900}\times \text{\$27}}{\text{\$3}}}[/tex]
= 598 units
b. The average inventory would equal to
= Economic order quantity ÷ 2
= 598 units ÷ 2
= 299 units
Carrying cost = average inventory × carrying cost per unit
= 299 units × $3
= $897
c. The number of orders would be equal to
= Annual demand ÷ economic order quantity
= $19,900 ÷ 598 units
= 33.28 orders
Ordering cost = Number of orders × ordering cost per order
= 33.28 orders × $27
= $898
Firms may invest in fewer projects as a result of A. an increase in interest rates that increase economic growth. B. an increase in interest rates that decrease economic growth. C. a decrease in interest rates that increase economic growth. D. a decrease in interest rates that decrease economic growth. E. an increase in dividends that limit economic growth.
Answer: B. an increase in interest rates that decrease economic growth.
Explanation:
If interest rates were to rise in an Economy, that would mean that the cost of borrowing just rose. The rise in the Cost of Borrowing reduces consumer spending as well as business investment. This will therefore lead to a lower Aggregate demand. A lower AD in the Economy usually leads to a decrease in economic growth.
Now, if such things were to happen, a firm may definitely invest in fewer projects because first off it will be more expensive for them to borrow and invest because of the high rates. They will also be discouraged because of the Decrease in economic growth as the chances of their projects doing well will be drop in a depreciating economy.
The only capital investment required for a small project is investment in inventory. The operating cash flow this year was $10,000, and inventory increased from $4,000 to $5,000. What was the cash flow from the project?
Answer:
$9,000
Explanation:
Cash flow can be defined as the amount of cash that is being transferred or that flows into and out of a business which may either leads to increase or decrease in the amount of money a business or individual has.
Cash flow = profit − increase in inventory =
$4,000 - $5,000 = $1000
Therefore
$10,000 − $1,000 = $9,000
Therefore the Cash flow from the project is $9,000
The cash flow from the project will be $9000.
Cash flow from the project simply means the cash flow that's generated. It can be gotten by using the formula:
Cash flow = Profit - Increased working capital.
Therefore, cash flow will be:
Cash flow = Profit - Increased working capital.
Cash flow = $10000 - ($5000 - $4000)
Cash flow = $10000 - $1000
Cash flow = $9000
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Becton Labs, Inc., produces various chemical compounds for industrial use. One compound, called Fludex, is prepared using an elaborate distilling process. The company has developed standard costs for one unit of Fludex, as follows:
Standard Quantity Standard Price
or Rate Standard Cost
Direct materials 2.00 ounces $ 30.00 per ounce $ 60.00
Direct labor 0.50 hours $ 14.00 per hour 7.00
Variable manufacturing overhead 0.50 hours $ 3.40 per hour 1.70
$ 68.70
During November, the following activity was recorded relative to production of Fludex:
a. Materials purchased, 10,000 ounces at a cost of $287,000.
b.
There was no beginning inventory of materials; however, at the end of the month, 3,000 ounces of material remained in ending inventory.
c.
The company employs 20 lab technicians to work on the production of Fludex. During November, they worked an average of 130 hours at an average rate of $12.00 per hour.
d.
Variable manufacturing overhead is assigned to Fludex on the basis of direct labor-hours. Variable manufacturing overhead costs during November totaled $4,700.
e. During November, 3,400 good units of Fludex were produced .
Required:
1. For direct materials:
a.
Compute the price and quantity variances. (Input all amounts as positive values. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e, zero variance).)
b. The materials were purchased from a new supplier who is anxious to enter into a long-term purchase contract. Would you recommend that the company sign the contract?
Yes
No
2. For direct labor:
a.
Compute the rate and efficiency variances. (Input all amounts as positive values. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e, zero variance).)
b.
In the past, the 20 technicians employed in the production of Fludex consisted of 4 senior technicians and 16 assistants. During November, the company experimented with fewer senior technicians and more assistants in order to save costs. Would you recommend that the new labor mix be continued?
Yes
No
3.
Compute the variable overhead rate and efficiency variances. (Input all amounts as positive values. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e, zero variance).)
Becton Labs' direct materials had a favorable price variance and an unfavorable quantity variance. Direct labor showed a favorable rate variance but an unfavorable efficiency variance. Variable manufacturing overhead revealed a favorable rate variance and an unfavorable efficiency variance.
Direct Materials Variances
The price variance for direct materials is calculated by comparing the standard cost to the actual cost paid for the materials. The standard cost for materials would be 2 ounces per unit of Fludex at $30 per ounce, totaling $60. With the company purchasing 10,000 ounces for $287,000, the actual price per ounce is $28.70. The price variance is thus (30 - 28.70) * 10,000 ounces, which equals a $13,000 favorable variance.
The quantity variance is found by taking the standard quantity for the actual production and comparing it to the actual quantity used. To produce 3,400 units, the standard quantity would be 3,400 units * 2 ounces/unit = 6,800 ounces. The actual quantity used is 10,000 ounces purchased minus 3,000 ounces ending inventory, equaling 7,000 ounces. The variance is then (6,800 - 7,000) * $30 per ounce, resulting in a $6,000 unfavorable variance.
To answer whether Becton Labs should enter into a long-term contract with the new supplier, we should consider both the favorable price variance and the potential reasons for the unfavorable quantity variance.
Direct Labor Variances
The rate variance for direct labor is calculated by comparing the standard rate per hour to the actual rate paid. With a standard rate of $14 per hour and an actual rate of $12 per hour, multiplied by the total hours worked (20 technicians * 130 hours), we have an $11,200 favorable rate variance.
The efficiency variance compares the standard hours for actual production to the actual hours worked. Standard hours are 0.5 hours per unit * 3,400 units, totaling 1,700 hours. Actual hours were 2,600 (20 * 130), resulting in a 900-hour difference. Multiplying by the standard rate, we get a $12,600 unfavorable efficiency variance.
Deciding on whether to continue with the new labor mix requires further investigation of the causes and effects of the unfavorable efficiency variance.
Variable Manufacturing Overhead Variances
The variable overhead rate variance is the difference between the standard rate and the actual rate. The standard rate is $3.40 per hour. With $4,700 spent for 2,600 hours, the actual rate is approximately $1.81. Therefore, the variance is a favorable variance.
The variable overhead efficiency variance is computed by comparing the standard hours to the actual hours, similar to direct labor. With 1,700 standard hours and 2,600 actual hours, the difference applied to the standard overhead rate results in an unfavorable efficiency variance.
A company has two classes of stock authorized: 9%, $10 par preferred, and $1 par value common. The following transactions affect stockholders’ equity during Year 1, its first year of operations: January 2 Issues 100,000 shares of common stock for $26 per share. February 6 Issues 2,100 shares of 9% preferred stock for $11 per share. September 10 Purchases 11,000 shares of its own common stock for $31 per share. December 15 Resells 5,500 shares of treasury stock at $36 per share. Required: Record each of these transactions. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field.)
Answer and Explanation:
The journal entries are shown below:
On Jan 2
Cash (100,000 shares × $26) $2,600,000
To Common Stock (100,000 shares × $1) $100,000
To Paid in capital in excess of par value - Common Stock $2,500,000
On Feb 6
Cash (2,100 shares × $11) $23,100
To Preferred stock (2,100 shares × $10) $21,000
To Paid in capital in excess of par value-preferred stock $2,100
On Sep 10
Treasury Stock (11,000 × $31) $341,000
To Cash $341,000
(Being the purchase of own common stock is recorded)
On Dec 15
Cash (5,500 shares × $36) $198,000
To Treasury Stock (5,500 shares × $31) $170,500
To Paid in capital from sale of treasury stock $27,500
(Being the resells of treasury stock is recorded)
As a financial analyst, you are tasked with evaluating a capital budgeting project. You were instructed to use the IRR method and you need to determine an appropriate hurdle rate. The risk-free rate is 4% and the expected market rate of return is 11%. Your company has a beta of 1.4 and the project that you are evaluating is considered to have risk equal to the average project that the company has accepted in the past. According to CAPM, the appropriate hurdle rate would be _________________________ ?
Answer:
13.8%
Explanation:
The appropriate hurdle rate would be the required return from CAPM or
Rate = 4% + 1.4(11% - 4%)
=4%+1.4(7%)
=4%+9.8
= 13.8%.
Focusing a supply chain on ________________ is a modern way of ensuring high-quality inputs and extending an organization’s continuous improvement efforts. Multiple Choice ISO 14000 customers lowest cost per unit sourced suppliers that emphasize continuous-flow production close, collaborative ties with suppliers partners pursuing similar strategies
Answer:
The correct answer is letter "D": close, collaborative ties with suppliers.
Explanation:
A Supply Chain is a network of organizations that work in the production and distribution of a good. The network is managed by the manufacturer from gathering the raw materials until a final good is provided to end-consumers. The relationships between suppliers, producers, distributors, retailers, and customers are vital for the sustainability of the firm.
To ensure the high-quality of the production, most companies aim to establish strong bonds with their suppliers by promoting mutual efforts in an attempt to maximize each others' profits.
5. Immediately after a used truck is acquired, a new motor is installed and the tires are replaced at a total cost of $5,750. Is this a capital expenditure or a revenue expenditure
Answer: Capital Expenditure
Explanation:
Capital Expenditure occurs if the expense made was to enhance the capability of an asset to perform the role for which it was acquired over an extended period of time.
The new motor and tires will go a long way in making sure that the Truck benefits the company over a long period of time and so should be considered CAPITAL EXPENDITURE.
Do comment if you need any further clarification.
Answer:
CAPITAL EXPENDITURE
Explanation:
In accounting, an expense carried out is considered to be capital expenditure when the asset is an investment with a life of more than one year or a newly purchased capital asset or an expense which improves the useful life of an existing capital asset.
Capital Expenditure is the money an organization or firm uses to purchase, maintain, upgrade or improve its fixed assets such as vehicles, production equipment, buildings or land.
Capital expenditures on fixed assets may include everything ranging from repairing a roof to building, to purchasing a new vehicle or upgrading a newly purchased used vehicle.
Therefore, the total costs of $5,750 used in the installation of a new motor and replacement of the tires are the CAPITAL EXPENDITURE.
Other examples of CAPITAL EXPENDITURE are costs of:
- Buildings (with costs to extend useful life)
- Land (with the cost of upgrading land e.g irrigation system setup, land clearing, etc)
- Machinery (with costs of transporting equipment to factory)
etc.
Shelton Co. purchased a parcel of land six years ago for $858,500. At that time, the firm invested $130,000 in grading the site so that it would be usable. Since the firm wasn't ready to use the site itself at that time, it decided to lease the land for $46,500 a year. The company is now considering building a warehouse on the site as the rental lease is expiring. The current value of the land is $910,000. What value should be included in the initial cost of the warehouse project for the use of this land
Answer:
The current value of land = $910,000.
This should be included in the cost of warehouse project.
Explanation:
Before, answering this question, we need to understand few concepts:
Opportunity cost:
Opportunity costs represent the benefits an individual, investor or business misses out on when choosing one alternative over another. An opportunity cost is relevant to decision-making.
Sunk cost
A sunk cost refers to money that has already been spent and which cannot be recovered. Sunk costs are excluded from future business decisions because the cost will remain the same regardless of the outcome of a decision.
Relevant cost
Relevant costs and revenues are those costs and revenues that change as a direct result of a decision taken.
Relevant cost of non-current assets
The relevant costs associated with non-current assets, such as plant and machinery, are determined in a similar way to the relevant costs of materials.
Case 1:
If plant and machinery is to be replaced at the end of its useful life, then the relevant cost is the current replacement cost.
Case 2
If plant and machinery is not to be replaced, then the relevant cost is the higher of the sale proceeds (if sold) and the net cash inflows arising from the use of the asset (if not sold).
Solution:
We are under Case 1
The current value of land = $910,000.
This is the opportunity cost of the land in the warehouse project. If the project is not undertaken the land can be sold. This should be included in the cost of warehouse project.
Cost of land = $858,500 which is sunk cost.
The cost of upgradation = $130,000
It is also a cost incurred in past, so it is a sunk cost.
The lease rental = $46,500. The lease amount is irrelevant since the lease is expiring.
The value that should be included in the initial cost of the warehouse project for the use of the land is $279,000, which is the total rental income forgone over the six-year period.
Explanation:The value that should be included in the initial cost of the warehouse project for the use of the land is the opportunity cost of leasing the land for six years. The opportunity cost is the value of the best alternative forgone. In this case, the best alternative forgone is the rental income that Shelton Co. could have earned from leasing the land over the past six years.
To calculate the opportunity cost, we need to determine the total rental income forgone over the six-year period. The annual rental income is $46,500, so the total rental income forgone is $46,500 x 6 = $279,000.
Therefore, the value that should be included in the initial cost of the warehouse project for the use of the land is $279,000.
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Timothy and John both work 8 hours a day. Both Timothy and John can produce shoes or clothes, though at different rates. For Timothy, he can produce 2 pairs of shoes per hour or 4 units of clothes per hour. For John, he produces 1 pair of shoes per hour, or 5 units of clothes per hour. _____________ has the absolute advantage in producing shoes and _____________ has the absolute advantage in producing clothes.
Answer:
Timothy; John
Explanation:
A country has a absolute advantage in producing a commodity if it produces that commodity with less inputs than the other country.
For Timothy, he can produce:
2 pairs of shoes per hour or 4 units of clothes per hour
For John, he produces:
1 pair of shoes per hour, or 5 units of clothes per hour.
Therefore, the Timothy has a absolute advantage in producing shoes because he can produce more number of shoes in an hour than John.
And, the John has a absolute advantage in producing clothes because he can produce more units of clothes in an hour than Timothy.
Business LawSelf-described "sports nut" Gary Baker signed up for a threeyear club-seat "package" that entitled him and a companion to tickets for 41 Boston Bruin hockey games and 41 Boston Celtic basketball games at the New Boston Garden Corporation’s Fleet Center for approximately $18,000 per year. After one year, Baker stopped paying for the tickets thinking that he would simply lose his $5,000 security deposit. New Boston sued Baker for breach of contract, seeking the balance due on the tickets of $34,866. At trial, Baker argued to the jury that although he had breached his contract, New Boston had an obligation to mitigate damages, for example, by treating his empty seats and those of others in the same situation as "rush seats" shortly before game time and selling them at a discount. New Boston argued that just as a used luxury car cannot be returned for a refund, a season ticket cannot be canceled without consequences. Decide.
Answer:
The results has not been evaluated here and the odds of those seats getting vacant is additionally not zero. Notwithstanding that $5000 has additionally been paid as security store. In this way, all these sum should be summarized to choose what is the rest of the sum that should be taken from Gary. In any case, this is reliant on if the 'Terms and Conditions' particularly referenced that in the event of non-installment they'd recuperate the rest of the sum from Gary.
However, for the most part in situations where a security sum is taken, this sum should deal with any misfortune that happens due to the client. Thus if the 'Terms and conditions' doesn't expressly make reference to that the sum must be guaranteed from the client, they can't sue Gary.
Baker potentially breached his three-year contract with New Boston Garden Corporation by not paying after a year. The case focuses on contractual obligations and mitigation of damage. But without specific contract stipulations or state laws information, it appears that Baker may remain liable for the balance.
Explanation:In the given scenario, Gary Baker signed a contract with New Boston Garden Corporation's Fleet Center for a three-year club-seat package. By stopping to pay after one year, Baker breached the contract, a binding legal agreement. The question pertains to contractual obligations and the mitigation of damages in case of breach.
In most jurisdictions, the injured party – in this case, New Boston – has a duty to mitigate (limited) damage. However, the methods of mitigation should be reasonable. Arguably, rushing to sell tickets shortly before game time may not be reasonable or practical as it's dependent on market conditions.
Furthermore, New Boston's argument that season tickets, like a used luxury car, cannot be returned without consequences, may hold some validity under certain legal systems that place the obligation on the customer to honor the contract or face penalties. Thus, based on these aspects, and without taking into consideration specific state laws or contractual stipulations, at face value, Baker may indeed remain liable for the balance.
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Universal Electronics, Inc. (UEI), which started operations one year ago, has two divisions: Consumer and Commercial. Both divisions invest heavily in R&D, which is assumed to benefit five years. R&D spending is made uniformly throughout the year. UEI has a cost of capital of 11 percent. Selected financial information for the two divisions (in thousands of dollars) for the year just completed follows. Consumer Commercial Sales revenue $ 22,000 $ 37,000 Divisional income 3,850 3,885 Divisional investment 27,500 27,750 Current liabilities 1,000 800 R&D 1,000 1,000 Required: Evaluate the performance of the two divisions assuming UEI uses return on investment (ROI).
Answer:
Investments in both divisions are performing equally well at the ROI of 14% each.
Explanation:
The financial data in the question are merged together and they are first sorted before the question is answered as follows:
Consumer ($) Commercial ($)
Sales revenue 22,000 37,000
Divisional income 3,850 3,885
Divisional investment 27,500 27,750
Current liabilities 1,000 800
R&D 1,000 1,000
The answers are now as follows:
Divisional ROI = Divisional income / Divisional investment
Consumer division ROI = $3,850 / $27,500 = 0.1400, or 14%
Commercial division ROI = $3,885 / $27,750 = 0.1400, or 14%
This shows that investments in both divisions are performing equally well at the ROI of 14% each.
For the current year ($ in millions), Centipede Corp. had $80 in pretax accounting income. This included warranty expense of $6 and $20 in depreciation expense. Two million of warranty costs were incurred, and depreciation deductions in the tax return amounted to $35. In the absence of other temporary or permanent differences, what was Centipede's taxable income currently, assuming a tax rate of 40%?
a. 19.6 million.
b. 27.6 million.
c. 29.2 million.
d. 25.2 million
Answer:
The correct option is B,$27.6 million
Explanation:
In order to compute Centipede Corp's taxable income for the current year,we need to adjust the pre-tax accounting income by adding back estimates of warranty and depreciation expenses,whereas the actual warranty and depreciation deductions allowed by the tax authority are deducted.
Million($)
Pre-tax accounting income 80
add:
estimated warranty expense 6
estimated depreciation expense 20
Total 106
less:
actual warranty cost (2)
actual depreciation deductions (35)
Taxable income 69
Since $69 million is not one of the options,hence the income tax payable is computed thus:
40%*$69 million=$27.6
The petty cash fund had an initial imprest balance of $ 220. It currently has $ 18 in cash, $ 3 in miscellaneous petty cash tickets, and an additional $ 191 in specific petty cash tickets. The debit to Cash Short & Over would be:
Answer:
The debit to Cash Short & Over would be: $ 8
Explanation:
Particulars Debit Credit
Cash $ 18
Miscellaneous $ 3
Additional Tickets $ 191
Cash Over and Short $ 8
Petty Cash Fund $ 220
Sometimes a petty cashier fails to get a receipt for a payment or over pays for the amount due. When this occurs and the fund is later reimbursed the petty cash payments report plus the cash remaining will not total to the fund balance . This mistake causes the fund to be short. This shortage is recorded as an expense in the reimbursing entry with a debit to Cash Short & Over .
Final answer:
The debit to Cash Short & Over would be $8. This is calculated by subtracting the sum of the current cash on hand and petty cash tickets ($212) from the initial imprest balance ($220).
Explanation:
The petty cash fund had an initial imprest balance of $220. The question involves reconciling the petty cash, which includes counting the remaining cash and accounting for the petty cash tickets. The current cash on hand is $18 and there are petty cash tickets totaling $194 ($3 in miscellaneous tickets plus $191 in specific petty cash tickets). The total of cash and tickets should equal the initial imprest balance. To find the debit to Cash Short & Over, we need to calculate the difference between the initial balance and the sum of current cash and tickets.
Calculation:
Initial imprest balance: $220
Current cash on hand: $18
Petty cash tickets: $194 ($3 + $191)
Total cash and tickets: $18 + $194 = $212
Debit to Cash Short and Over = Initial imprest balance - Total cash and tickets
Debit to Cash Short and Over = $220 - $212 = $8
Therefore, the debit to Cash Short & Over would be $8.
A company has two departments, Y and Z that incur delivery expenses. An analysis of the total delivery expense of $14,000 indicates that Dept. Y had a direct expense of $1,500 for deliveries and Dept. Z had no direct expense. The indirect expenses are $12,500. The analysis also indicates that 50% of regular delivery requests originate in Dept. Y and 50% originate in Dept. Z. Departmental delivery expenses for Dept. Y and Dept. Z, respectively, are:
Answer:
Dept Y = $7750
Dept Z = $6250
Explanation:
To allocate the cost the cost , the first step is to deduct the indirect expenses related to Y
The allocate the balance in the ratio of 50:50 to Y and Z
Total delivery expenses - $14,000
Dept Y = 1500 +( 12500*50%)
1500+6250 =7750
Dept Z = 6250
If a manager considers one employee at a time and circles a number/word to signify the degree to which that employee demonstrates a particular trait, he/she is using a: Group of answer choices
Answer:
graphic rating scale
Explanation:
A graphic rating scale is described as one of the different types of methods involved in "performance appraisal". In the given method, an individual's behaviors or traits that are considered as significant for "effective performance" are being "listed-out" and then every employee is being rated against the given traits. These ratings would help different employers to 'quantify' or 'measure' the behavior displayed or represented by its employees.
The correct answer for the question above is the graphic rating scale.
A zero-investment portfolio with a positive alpha could arise if: a. The expected return of the portfolio equals zero. b. The capital market line is tangent to the opportunity set. c. The Law of One Price remains unviolated. d. A risk-free arbitrage opportunity exists.
Answer:
d. A risk-free arbitrage opportunity exists.
Explanation:
A zero-investment portfolio refers to a portfolio of assets which all the investments its contains has a collective net value that is zero which is obtained when there is a simultaneously purchasing securities and selling equivalent securities.
Alpha refers to the active return on an investment. This implies that when a zero-investment portfolio has a positive alpha, its active return is positive. This can only occur when there is a risk-free arbitrage opportunity.
A risk-free arbitrage refers to the opportunity to make some profit with no capital investment.
Therefore, the correct option is d. A risk-free arbitrage opportunity exists.
Final answer:
A zero-investment portfolio with a positive alpha typically results from a risk-free arbitrage opportunity, which aligns with the concept of generating excess returns without additional risk. An analysis of three investments' risks and expected returns indicates the third investment as the safest, the first as the riskiest, and the second as having the highest expected return on average.
Explanation:
A zero-investment portfolio with a positive alpha suggests the existence of an arbitrage opportunity where an investor can generate excess returns without any additional investment or risk. The statement in the question "A risk-free arbitrage opportunity exists" aligns with the concept of generating a positive alpha without additional investment, thereby leading to the creation of a zero-investment portfolio with positive returns. Other statements do not logically support the creation of such a portfolio. Option d is correct .
Investment analysis involves evaluating risk and return to determine the safest and riskiest investments, along with the highest expected average returns. Considering the probabilities and potential returns for three different investments, we find:
The first investment (software company) has an expected return of $200,000The second investment (hardware company) has an expected return of $600,000The third investment (biotech firm) has an expected return of $400,000The biotech firm represents the lowest risk due to its minimal chance of loss. Conversely, the software company carries the highest risk, stemming from its elevated probability of incurring a loss. The hardware company offers the highest expected return on average, considering the balance of probabilities and potential profits.
Throughout history, high-risk investment approaches have sometimes been detrimental to investment portfolios, particularly during times of economic downturn or market volatility, such as the 2008 financial crisis or the dot-com bubble burst.
The builder of a new arena is sued after a section of the roof collapses during a football game, injuring hundreds of people and causing extensive damage to the arena. This is an example of what kind of exposure
Answer:
The correct answer is letter "D": completed operations liability exposure.
Explanation:
Completed Operations Liability exposure refers to the risk contractors are subject to by which a third party can sue them alleging bodily and property injuries as a result of finished work. Under these circumstances, all the parties responsible in the operations of the work (contractors and subcontractors) are cited until it is determined who could be liable for the harm.
Contractors are obligated to keep a completed operations liability insurance to face such scenarios, Failure to count on insurance for these cases could be considered a breach of the contract with the general contractor of the work.
Finishing Touches has two classes of stock authorized: 8%, $10 par preferred, and $1 par value common. The following transactions affect stockholders' equity during 2015, its first year of operations:
January 2 Issues 100,000 shares of common stock for $35 per share.
February 6 Issues 3,000 shares of 8% preferred stock for $11 per share.
September 10 Repurchases 11,000 shares of its own common stock for $40 per share.
December 15 Reissues 5,500 shares of treasury stock at $45 per share.
In its first year of operations, Finishing Touches has net income of $160,000 and pays dividends at the end of the year of $94,500 ($1 per share) on all common shares outstanding and $2,400 on all preferred shares outstanding.
Required:
Prepare the stockholders' equity section of the balance sheet for Finishing Touches as of December 31, 2015. (Amounts to be deducted should be indicated by a minus sign.)
FINISHING TOUCHES
Balance Sheet
(Stockholders’ Equity Section)
December 31, 2015
Stockholders’ equity:
Common stock
Preferred stock
Treasury stock
Additional paid-in capital
Total paid-in capital
Retained earnings
Treasury stock
Total stockholders’ equity
The stockholders' equity section of the balance sheet for Finishing Touches as of December 31, 2015, includes common stock, preferred stock, treasury stock, additional paid-in capital, total paid-in capital, retained earnings, and total stockholders' equity.
Explanation:FINISHING TOUCHES
Balance Sheet
(Stockholders’ Equity Section)
December 31, 2015
Stockholders’ equity:
Common stock: Issued 100,000 shares at $35 per share
Preferred stock: Issued 3,000 shares at $11 per share
Treasury stock: Repurchased 11,000 shares at $40 per share and reissued 5,500 shares at $45 per share
Additional paid-in capital: No information provided
Total paid-in capital: Calculated by adding common stock and preferred stock
Retained earnings: Net income of $160,000 minus dividends of $94,500
Total stockholders’ equity: Calculated by adding total paid-in capital and retained earnings
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Final answer:
The stockholders' equity section of Finishing Touches includes Common and Preferred Stock, Additional Paid-In Capital for both, and Retained Earnings—after accounting for dividends paid and Treasury Stock transactions. Total Paid-In Capital equals $3,533,000, Total Treasury Stock equals $(192,500), and after calculations, Total Stockholders' Equity is $3,403,600.
Explanation:
Finishing Touches Stockholders' Equity Section:
Here's how to prepare the stockholders' equity section of the balance sheet for Finishing Touches as of December 31, 2015:
Common Stock: 100,000 shares x $1 par value = $100,000Preferred Stock: 3,000 shares x $10 par value = $30,000Treasury Stock: 11,000 shares repurchased at $40 = $(440,000) Additional paid-in capital: This represents the amount that investors paid for shares of stock above the par value. In this case, we only have common stock with a par value of $1, so there is no additional paid-in capital.5. Total paid-in capital: To calculate the total paid-in capital, sum up the common stock, preferred stock, and additional paid-in capital: $100,000 (common stock) + $30,000 (preferred stock) + $0 (additional paid-in capital) = $130,000.6. Retained earnings: Retained earnings represent the accumulated profits of the company that have not been distributed as dividends. In this case, the net income for the year is $160,000, and the company paid dividends of $94,500. Therefore, the retained earnings can be calculated as net income minus dividends: $160,000 (net income) - $94,500 (dividends) = $65,500.7. Total stockholders' equity: To calculate the total stockholders' equity, sum up the total paid-in capital and retained earnings: $130,000 (total paid-in capital) + $65,500 (retained earnings) = $195,500.Now we can fill in the stockholders' equity section of the balance sheet for Finishing Touches as of December 31, 2015:FINISHING TOUCHESBalance Sheet(Stockholders' Equity Section)December 31, 2015Stockholders' equity:Common stock: $100,000Preferred stock: $30,000Treasury stock: -$440,000Additional paid-in capital: $0Total paid-in capital: $130,000Retained earnings: $65,500Total stockholders' equity: $195,500How walmart motivate thier employees?
Fran’s Crazy Salts has just been bought by Allspice. Employees are unsure of what that will mean for their jobs, as Allspice already has a competent workforce. As a result, many employees have started to call out sick and have begun to look for other jobs. Fran’s Crazy Salts should use a change agent to addressa. evaluating the intervention.b. collecting feedback.c. revitalizing the organization.d. adapting to mergers.e. managing conflict.
Answer:
Option d is correct.
Adapting to mergers
Explanation:
The change agent has the activity close by to ingrain trust in the workforce by coming up unmistakably on the organisation's approach for the current workforce ( of past organisation) so they can make certain about their future with the organisation and decide their future strategy. Adapting to mergers is the correct choice as the change specialist needs to prepare the workforce work and submitted as ahead of schedule as could reasonably be expected.
Wilson Center is a private not-for-profit voluntary health and welfare entity. During 2017, it received unrestricted pledges of $600,000, 60 percent of which were payable in 2017, with the remainder payable in 2018 (for use in 2018). Officials estimate that 15 percent of all pledges will be uncollectible. How much should Wilson Center report as contribution revenue for 2017? In addition, a local social worker, earning $20 per hour working for the state government, contributed 600 hours of time to Wilson Center at no charge. Without these donated services, the organization would have hired an additional staff person. How should Wilson Center record the contributed service?
Answer:
Pledges $600,000
Uncollectible Pledges at 15% -$90,000
Net Pledge Balance $510,000
Pledges - 2017 at 60% $306,000
Unrestricted Net Asset - Contribution $306,000
Account Titles Debit Credit
a)Contribution Receivable $360,000
Allowance for Uncollectible Pledges $54,000
Unrestricted Net Asset - Contribution $306,000
b)Salary Expense (20 * 600) $12,000
Unrestricted Net Asset - Contribution $12,000
Final answer:
Wilson Center should report $270,000 as contribution revenue for 2017, which is the amount of receivable pledges for 2017 minus estimated uncollectibles. The value of the donated services by the social worker, at fair market value, should also be recorded as both an increase in service expense and an increase in contribution revenue.
Explanation:
To determine how much Wilson Center should report as contribution revenue for 2017, the following steps should be taken:
Calculate the expected receivable pledges for 2017: $600,000 pledges × 60% = $360,000.
Estimate the uncollectible pledges: $600,000 total pledges × 15% = $90,000.
Subtract the uncollectible pledges from the receivable pledges for 2017: $360,000 - ($600,000 × 15%) = $360,000 - $90,000 = $270,000.
Therefore, Wilson Center should report $270,000 as contribution revenue for 2017.
Regarding the contributed service, since the services provided by the local social worker enhanced the nonprofit's capabilities and would have required the organization to hire additional staff, Wilson Center should record this donated service as both an increase in service expense and an increase in contribution revenue at the fair value of the service provided.
Here is the journal entry to record the service:
Debit Service Expense: 600 hours × $20/hour = $12,000.
Credit Contribution Revenue: $12,000.
Devon and Edmond enter into a contract for the closing of a sale of Devon's recording studio. When Edmond's schedule conflicts, he asks Ferdie to perform his duties at the closing. This transfer of dutiesa. a delegation.b. an assignment.c. prohibited.d. a negotiation.
Answer:
Option A; DELEGATION.
Explanation:
Delegation is an administrative process of getting things done by others by giving them responsibility.
Example is a manager asking a subordinate to take over his duties at a meeting. However, the person who delegated the work remains accountable for the outcome of the delegated work.
Delegation simply means empowering a subordinate to get a work done (i.e. a transfer of authority from a superior to a subordinate).
Since Edmond asks Ferdie to perform his duties at closing because of his own conflicting schedule, therefore, this transfer of duties is called DELEGATION.
Answer:
A
Explanation:
Delegation
Delegation is the act of transfering of authority or responsibility from a superior to a subordinate Indeed, delegation is the downward transfer of authority from a superior to a subordinate. Edmond for some reason was unavoidable absent due to schedule conflicts and delegates the work to Ferdie, to perform his duties at the closing
Free Spirit Industries Inc.’s marketing sales director doesn’t think that the market for the firm’s goods is big enough to sell enough units to make the company’s target operating profit of $15,000,000. In fact, she believes that the firm will be able to sell only about 175,000 units. However, she also thinks the demand for Free Spirit Industries Inc.’s product is relatively inelastic, so the firm can increase the sale price. Assuming that the firm can sell 175,000 units, what price must it set to meet the CFO’s EBIT goal of $15,000,000?
Answer:
In the attached the fixed costs is $12,000,000
selling price is $41.50
variable cost is $12.80
The price for the target EBIT of $15 million is $167.09
Explanation:
target units=fixed costs+target EBIT/selling price-variable cost
target units is 175,000
fixed costs of $12,000,000
target EBIT of $15,000,000
variable cost is $12.80
selling price is unknown,let assume is X
175,000=($12,000,000+$15,000,000)/X-12.80
175,000=27,000,000/X-12.80
175,000*(X-12.80)=27,000,000
X-12.80=27,000,000/175,000
X-12.80=154.29
X=154.29+12.80
X=$167.09
EBIT=Sales units*(selling price-variable cost)-fixed costs
In 2017, Ozzie purchased a 2014 Ford Escort from his neighbor for his son, purchased a 2013 "one owner" Camry from Larchmont Toyota for his wife, bought a 2017 new Ford for himself, and sold his 2006 Dodge Caravan to his teenage nephew. Which, if any, of these transactions will be included in GDP in 2017?
Answer:
Ozzie's purchase of the 2017 new Ford would be included in GDP
Explanation:
Gross domestic product is the sum of all final goods and services produced in an economy within a given period which is usually a year.
Only goods produced in a given year would be included in the calculation of GDP.
Its only the 2017 new Ford that produced in 2017 that would be counted as part of 2017's GDP
I hope my answer helps you
The purchase of new goods, such as a 2017 new Ford, will be included in the GDP of 2017, but used goods transactions, like a 2014 Ford Escort and a 2013 Camry, will not be included.
Explanation:Transactions involving the purchase of new goods, such as the 2017 new Ford, will be included in the GDP of 2017. However, transactions involving the purchase of used goods, like the 2014 Ford Escort and the 2013 Camry, will not be included in the GDP as they are not considered new production.
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The Holmes Company's currently outstanding bonds have a 10% coupon and a 14% yield to maturity. Holmes believes it could issue new bonds at par that would provide a similar yield to maturity. If its marginal tax rate is 40%, what is Holmes' after-tax cost of debt
Answer:
The correct answer is 6.84%.
Explanation:
According to the scenario, the given data are as follows:
Coupon = 10%
yield to maturity = 14%
Marginal Tax rate = 40%
Here, Issue new bond at par show that YTM = Coupon rate
So, we can calculate the after tax cost of debt by using following formula:
After tax cost of debt = YTM × ( 1 - marginal tax rate )
By putting the value, we get
After tax cost of debt = 0.14 × ( 1 - 0.40)
= 0.14 × 0.60
= 0.684
= 6.84%
Explain why a contractor will typically do almost anything in his power to prevent having the owner notify the bonding company that the contractor has failed to fulfill some of the provisions guaranteed by a bond.
Answer:
Default by Contractor
Explanation:
A contractor will typically prevent having the owner notify the bonding company all because the bonding company, upon notification by the obligee, is then required to make remedy to the owner in accord with the provisions of the bond instrument, up to a maximum of the face amount of the bond.
Answer:
Explanation:
Note that The contractor is said to be in default when he fails to fulfil one or more provisions that was guaranteed in a bond. (He didn't keep his own part of the bargain in the bond)
He will do everything within his power to ensure that the owner doesn't know this because Once the owner knows the bonding company of a default, the bonding company will fulfil the obligations as set forth in the bond instrument. The company will vigorously seek the principal which the bonding paid in fulfilling the provisions of the bond, and the contractor must pay out of his own pocket.
Presented below is information for Oakley Company for the month of March 2020.
Cost of goods sold $254,000
Rent expense $36,000
Freight-out 7,500
Sales discounts 8,800
Insurance expense 5,000
Sales returns and allowances 11,000
Salaries and wages expense 75,000
Sales revenue 425,000
Prepare a multiple -step income statement.
Answer:
Oakley Company multiple -step income statement for the month of March 2020.
Sales revenue 425,000
Less Sales returns and allowances (11,000)
Net Revenue 414,000
Less Cost of goods sold (254,000 )
Gross Profit 160,000
Less Operating Expenses
Selling And Distribution Expenses :
Sales discounts 8,800
Freight-out 7,500
Administrative Expenses :
Rent expense 36,000
Insurance expense 5,000
Salaries and wages expense 75,000 (132,300)
Operating Income 27,700
Explanation:
A multiple -step income statement shows income derived from Primary Activities of the Company (Operating Activities) separately from the Income that is derived from Secondary Activities of the Company (Non-Operating).
Answer:
Operating Income = $27,700
Explanation:
Kindly check the attached picture for the Full and detailed Oakley Company Income statement for March, 2020.
Evaluate how organizations can use one-sample hypothesis testing to determine if there are performance issues in the organization. Support your response with a specific example. In replies to peers, provide an additional example that supports the ideas presented.
Answer:
Explanation:
For example: Suppose you want to check the average working hour of employees. You may think that the average duration of an employees is 7.6 hours. You want to check this claim so you collect a sample of 20 employees and note their duration of work. (please check attached file for this, and continue)
NULL HYPOTHESIS H0:u= 7.6 HOURS
ALTERNATIVE HYPOTHESIS Ha: ≠7.6 HOURS
alpha=0.05
t= 7.765-7.6/1.25/sqrt(20)
t= 0.165/1.25/4.47
t= 0.165/0.28
t= 0.589
degrees of freedom= n-1=20-1=19
t critical = 2.09
Since t critical is GREATER than t calculated therefore we fail to reject null hypothesis H0.
From this we can conclude that We don't have enough or sufficient evidence to say that the mean working duration is different than 7.6 hours.